While the role of non-economic factors – education, political conditions, social acceptance, the family system, in a nation’s development is crucial, one cannot ignore the role economic factors play. They determine the citizens’ confidence in their government.
The Reserve Bank of India (RBI) conducts the Consumer Confidence Survey (CCS) every year to measure the degree of optimism consumers feel about the overall state of the economy and their personal financial situation.
The June 2017 round of CCS was conducted in six metropolitan cities – Bengaluru; Chennai; Hyderabad; Kolkata; Mumbai; and New Delhi and it obtained 5,259 responses on households’ perceptions and expectations;
- on the general economic situation,
- the employment scenario,
- the overall price situation and,
- their own income and spending.
The survey shows that the Current Situation Index (CSI) dipped into the pessimistic zone due to deterioration in sentiment across all the parameters. There was also a dip in the Future Expectations Index (FEI) in May 2017. Households’ current perceptions on the general economic situation deteriorated in the June 2017 round; it has remained in the pessimistic zone for the last three rounds with outlook for a year ahead worsening in the recent period, said the survey.
Perception on income levels of the respondents appears to have remained the same over the past year, but the views exhibit wide divergence; the outlook on income, though optimistic, has fallen from the May 2017 round. The percentage of people polled who said that their incomes had increased from a year ago was lower than in December 2013 and March 2014 – when the UPA government was in power.
Respondents’ perceptions as well as outlook on overall spending remained highly optimistic with a marginal dip in the net response from the May 2017. The outlook on discretionary spending (spending on things that consumer want to buy rather than need to buy) has also improved in the recent period.
An deterioration was also shown in consumers’ perception on employment which turned pessimistic in the last four rounds, though majority of respondents expect it to improve going forward.
Respondents’ sentiments on the price level have turned more pessimistic in the recent period and softening of the outlook on inflation in the second half of 2016 has been reversed.
The overall perception of consumers on various economic factors is given below:
Since the BJP-led NDA government’s rule, the Indian economy has seen a lot of reforms from demonetisation, lower fiscal deficit, low increases in minimum support prices, the introduction of the Goods and Services Tax (GST) to the removal of subsidy on LPG, among others. Analysts have pointed out that some of these reforms, while being beneficial in the long run, may have a negative impact on the economy in the short run, reported Livemint.
The RBI survey is a warning sign for the current government and it needs to adhere to it if it wishes to continue for another term.
To read the full survey click here.